Planning Your Gift
You Can Develop a Giving Plan
In general, planned giving refers to any gift other than cash, usually estate gifts. A planned gift can be as simple as a gift through your will (charitable bequest) or as complex as trusts that convert real estate or other tangible assets into lifetime income to you, the donor, with a remainder gift to the nonprofit organization such as Aptiv.
There are many ways to plan your gift. The following are brief descriptions of the most typical forms of planned gifts.
The definition of charitable bequests is as simple as it sounds: to include a provision in one’s will, estate plan or living trust that allocates funds or assets to a designated not-for-profit organization such as Aptiv Foundation. Here are some examples:
A residuary bequest may be for a percentage or all of the estate remaining after payment of debts, taxes, expenses and all other bequests:
I devise and bequeath the rest, residue and remainder of my estate to Aptiv Foundation to their “Real Hope Endowment.”
I devise and bequeath _______ percent of the residue of my estate to Aptiv Foundation for general use and purposes.
A general bequest is for a specific dollar amount:
I bequeath the sum of $_________ to the Aptiv Foundation for general use and purposes.
A specific bequest is for a specific piece of property:
I bequeath (insert description of property) to Aptiv Foundation for general use and purposes.
A contingent bequest plans for the situation when the beneficiary of a bequest dies before you or disclaims the property:
If (insert name of person) predeceases me or disclaims any interest in (insert description of property), I bequeath such property to Aptiv Foundation for general use and purposes.
Donating stocks, bonds, or mutual fund shares are a great gift as they are a tax free gift to Aptiv and they provide an income tax deduction for the donor.
Individual Retirement Accounts (IRAs) and Pension Plans
Legacy gifts from IRAs or pension plans are very similar to bequests. To create a legacy gift through one’s IRA or pension plan, an individual needs only to list Aptiv Foundation on the beneficiary designation form used by the plan administrator.
There are many ways in which a donor can benefit Aptiv with life insurance. Naming us as one of the beneficiaries of a life insurance policy is the simplest method. A donor may also transfer ownership of a paid-up policy. A charitable income tax deduction may be available when transferring ownership to Aptiv Foundation for the lesser of the cash value or premiums paid.
A Life Estate is a gift of one’s personal residence or farm to an organization while retaining the right to live on the property. Income, gift and estate tax benefits accrue to the donor from such a gift, assuming the gift is irrevocable.
Life Income Gifts
When most people think about planned giving, they frequently think about life income gifts. These gift arrangements generally offer the most intriguing gift options. All versions of life income gifts combine personal and tax planning advantages with a charitable legacy. Life income gifts generally involve the following:
- An irrevocable transfer of cash, securities or property to a charity or trust;
- A defined income stream for up to two individuals for life or a term of years;
- A charitable income tax deduction, reduced by the present value of the income stream;
- Some form of by-passing of capital gains when funded with appreciated assets; and
- A remainder gift to charity.
Commonly Utilized Life Income Vehicles
Charitable Remainder Trust
A charitable remainder trust is established when a donor irrevocably contributes cash, securities or other property to a trust paying an income stream to one or two designated individuals for life or for a term of years up to 20 years. The remainder assets are then distributed to the nonprofit. There are various ways to determine the income stream. A charitable remainder annuity trust provides a fixed annual payment amount to the income beneficiaries either for their lives or for a fixed term of years. A charitable remainder unitrust pays out a fixed percentage of the trust value each year.
Charitable Lead Trusts
The most complex and sophisticated of planned gift options are charitable lead trusts. These planned giving vehicles are the opposite of life income vehicles. The payment stream from a lead trust is directed first to the nonprofit(s) during the trust term. The remainder is then distributed to children or other family beneficiaries. The primary reason for donors to use a lead trust is to reduce estate and gifts taxes on intergenerational transfers. It is important to note that Lead Trusts are not utilized by donors to receive charitable income tax deductions or the avoidance of capital gains tax. These trusts are primarily an estate planning tool and individuals interested in this giving option must work with their own estate planning professionals.
Gifts of tangible property, such as art or collectibles, can be among the most challenging gifts. The rules for donors to receive a full fair market value income tax deduction should be understood by the donors, their financial advisors and the recipient nonprofits. The general rule is that all gifts of tangible personal property to nonprofits do not qualify for a standard fair market value deduction. Rather, it is the cost basis, or original purchase price, that is usually the only deductible portion of these gifts. There is an exception, however, when there is a reasonable expectation that the recipient nonprofit will actually make use of the property in a manner consistent with its exempt purpose. An example would be a museum receiving a work of art which it plans to display. This related use qualifies the gift for a fair market value income tax deduction. Another challenge for donors of tangible property is the appraisal requirement. Gift property that exceeds $5,000 in value requires a qualified appraisal. A qualified appraisal is one that is prepared by a qualified person who holds himself or herself out to the public as an appraiser for items similar to those gifted.
As with all legal and tax planning questions, competent counsel should be consulted prior to engaging in specific gift arrangements. Donors should also be strongly encouraged to seek independent counsel on any complex gift or estate planning matters. The information provided herein is for educational purposes only.
We are grateful to those who have considered it fitting to make a provision in their estate plans to support our mission.
If you are considering a planned gift or including Aptiv Foundation in your will and want more information, please contact Jackie Jensen-Utz at 608-784-9450 or at firstname.lastname@example.org.
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